TaxTMI 
TaxTMI 
2026 (4) TMI 412
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....ability of amortization charges in the revision proceedings. Therefore, the order of the Pr.CIT is to be held unwarranted. The learned Pr.CIT erred in assuming that the AO failed to examine the above mentioned issues in the scrutiny assessment. Hence, assumed that there is an error in the assessment order framed by the AO, however, the Pr.CIT failed to prove that the order u/s 143(3), is prejudicial to the interest of the Revenue, therefore, the order of the Pr.CIT u/s 263 is to be held bad in law. 2. The learned Principal CIT considering the documentary evidence submitted and collected by the AO should have clearly mentioned what is the deficit in the enquiries made and should have himself made a part of enquiry to prove the failure of the AO of NFAC, therefore, erred setting aside the assessment made by the AO of NFAC. 3. The learned Principal CIT erred in assuming that the AO has not properly/thoroughly verified the information available in this case without mentioning which of the document submitted before the AO had not properly verified and what sort of enquiries should have been made to assume the order as prejudicial to the interest of Revenue. Therefore, ....
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....amining the requirement of section 36(vii) of the IT Act, therefore, the revision u/s 263 of the IT Act is to be held as unwarranted. 11. The learned Pr.CIT ought to have appreciated that the assessee paid the tax u/s 115QA on buy back of its shares numbering 6615000 for a consideration of Rs. 20,48,00,000/- and the issue is accepted after verifying the transaction therefore, the learned CIT erred in directing the AO to verify the allowability of bad debts claimed by the assessee." 2. Succinctly stated, the assessee company, viz. M/s. Pennar Industries Limited had filed its return of income for A.Y. 2020-21 on 15.02.2021, declaring an income of Rs. 71,10,03,500/-. Subsequently, the case of the assessee company was selected for complete scrutiny under CASS on specific issues, viz., (i) debt written off and taxability under Section 41 of the Act; (ii) non-compliance with ICDS; (iii) large "any other amount allowable as deduction" in Schedule BP; (iv) mismatch of personal expenditure; (v) introduction of high value intangible assets; and (vi) short term capital gains under Section 111A of the Act. Thereafter, the AO framed the assessment vide his order passed under Section....
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....delay in filing the appeal, the Ld. AR submitted that the same had crept in because, as he was taken unwell and suffering from severe vertigo and could not attend his office for the period 28/04/2025 to 04/05/2025, therefore, he could not advise the assessee company to assail the order passed by the Ld. Pr. CIT under Section 263 of the Act, dated 28/02/2025, by filing an appeal with the Tribunal. The Ld. AR submitted that the accountant of the assessee company contacted him on 05/05/2025, and, thereafter, as per his advice, the appeal was filed with the Tribunal on 13/05/2025, which, however, involved a delay of 15 days. The Ld. AR to support his contention had drawn our attention to the application filed by the assessee company dated 02/12/2025 alongwith a supporting "affidavit", dated 02/12/2025 of Shri. Aditya Narsing Rao, Managing Director of the assessee company, wherein the aforesaid facts leading to the delay in filing the appeal were deposed. The Ld. AR submitted that as the delay in filing the appeal had crept in because of bona fide reasons and on account of any lackadaisical conduct of the assessee company, therefore, the same, in all fairness and interest of justice be ....
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....section 142(1) of the Act, dated 20/02/2022, Page Nos. 41 to 54 of APB. Also, the Ld. AR had drawn our attention to the assessment order passed by the AO under Section 143(3) r.w.s 144B of the Act, dated 20/09/2022. The Ld. AR submitted that the AO in the assessment order had, after carrying out necessary verifications, specifically recorded his observations regarding the issues on which the Ld. Pr. CIT had thereafter revised the order. The Ld. AR submitted that as the AO, while framing the assessment, had, after necessary verifications, arrived at a possible and plausible view regarding the subject issues, hence the Pr. CIT in the exercise of the powers vested with him under Section 263 of the Act could not have assumed jurisdiction to seek substitution of his view as against that of the AO. The Ld. AR to support his contention had relied on the judgment of the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC). 11. Apropos the merits of the case, the Ld. AR submitted that the core issues, based on which the Ld. Pr. CIT had revised the order passed by the AO under Section 143(3) r.w.s. 144B of the Act, dated 20.09.2022, had, inter alia, formed t....
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.... on record an "affidavit", dated 05/02/2026 of Shri. Aditya Narsing Rao, Managing Director of the assessee company, wherein he had deposed that the assessee company in the course of the assessment proceedings had furnished with the AO the complete details of the "bad debts" of Rs. 27.82 crores (supra), and had provided to him a list of customer wise bad debts with details such as job number, name of the party and amount involved. Apart from that, it is deposed that the bad debts of Rs. 27,82,33,342/- were taken into account by the assessee company while computing its income in the earlier years. The Ld. AR submitted that though the claim of the assessee company for deduction of bad debts was after necessary verifications accepted by the AO while framing the assessment, but, even otherwise, the Ld. Pr. CIT had failed to point out in his order u/s 263 of the Act, dated 28/02/2025, as to how the said claim of deduction of the assessee company was, as per the mandate of law, erroneous. Also, the Ld. AR stated that in case any amount of the subject debt is subsequently recovered by the assessee company in the succeeding years, then, the same, as per the mandate of Section 36(2)(ii) of t....
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....of the Pr. CIT wherein he had directed the AO to examine the amount of Rs. 2,36,20,000/- deducted under the head "Reversal of Provisions for Onerous Contract" in the computation of income vis-à-vis the nature of such debit and decide accordingly, the Ld. AR submitted that out of Rs. 2,36,20,000/-, a substantial portion represented reversal of provision, which had been disallowed/added back by the assessee company while computing its income for the preceding year. The Ld. AR submitted that if a provision is disallowed in an earlier year and subsequently reversed, the corresponding credit cannot again be taxed, nor can its reduction from income be disallowed, as it would amount to double taxation. Coming to the amount of Rs. 10,00,000/- credited to profit and loss account on reversal of provision, the Ld. AR submitted that the same was reduced in computation on the ground that it was merely a reversal of a provision and not real income. Elaborating on his contention, the Ld. AR submitted that, as the original provision was not allowed as a deduction in the earlier year, its reversal will not give rise to any taxable income during the subject year. 13. Per Contra, the Ld. CI....
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....cordingly. Coming to the issue of allowability of the assessee's claim for deduction of an amount of Rs. 2,36,20,000/- from its business income in the "computation of income" for the subject year, the Ld. CIT-DR submitted that though it was the claim of the assessee company that as the amount of Rs. 2,26,00,000/- debited as "Reversal of provision of UBR", was added to the income for AY 2019-20, thus, the same was reversed now, but no supporting material to substantiate the said claim was filed by the assessee company. Also, the Ld. CIT-DR submitted that the assessee company under the head "Provisions for loss on onerous contract" had a closing balance of Rs. 20 lac on 31/03/2019, which was reversed to the extent of Rs. 10 lac during the subject year and was disclosed under the head "Other income" in its profit & loss account, but was reduced from its business income while making income tax adjustments. The Ld. CIT-DR submitted that though the assessee company had reversed an amount of Rs. 10,00,000/-, but deducted an amount of Rs. 10,20,000/- in its computation of income. The Ld. CIT-DR submitted that as the AO, while framing the assessment, had failed to verify the aforesaid deduc....
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.... Section 263 of the Act and held that once a query is raised during scrutiny and answered to the satisfaction of the AO, the order cannot be revised merely because the query and reply are not reflected in the assessment order. 15. However, we find that the Pr. CIT was of the view that, as the Assessing Officer had failed to properly examine the above issues, the assessment order passed by him was rendered as erroneous and prejudicial to the interests of the Revenue. The Ld. Pr. CIT, while setting aside the assessment, had relied upon the judgment of the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83. 16. We have carefully considered the contentions advanced by the Ld. Authorised Representatives of both parties in the backdrop of the orders of the authorities below. In addition to examining the legality of the invocation of Section 263 of the Act, we shall hereinbelow adjudicate the issues on merits as well, as under: (A). Reversal of provision for onerous contract - Rs. 2,36,20,000/- 17. We find on a perusal of the record that the AO in the course of the assessment proceedings had neither raised any specific query nor carried out any verif....
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.... year under consideration. Accordingly, the order of the Ld. Pr. CIT under Section 263 of the Act, dated 28/02/2025, is modified in terms of our aforesaid observations. 17.2. Coming to the amount of Rs. 10,00,000/- credited to the Profit and loss account of the assessee company during the subject year, we find that it is the Ld. AR's claim that, as the same was a reversal of a provision and not real income, it was reduced in the "computation of income". In our view, if the original provision was not allowed as a deduction in the earlier year, its reversal will not give rise to taxable income during the year under consideration. Conversely, if deduction had been allowed earlier, its reversal would be taxable under Section 41(1) of the Act. However, as the relevant material to adjudicate the subject issue in the backdrop of our aforesaid observations is neither discernible from the record nor available before us, we direct the AO to verify the factual position and adjudicate the same in terms of our aforesaid observations. Accordingly, the order of the Ld. Pr. CIT under Section 263 of the Act, dated 28/02/2025, is modified in terms of our aforesaid observations. (B). Bad debts ....
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.... 36(1)(vii) of the Act. The Hon'ble Supreme Court in TRF Ltd. v. CIT (2010) 323 ITR 397 (SC) has categorically held that after the amendment to Section 36(1)(vii) with effect from 01.04.1989, it is not necessary for the assessee to establish that the debt has become irrecoverable. It is sufficient if the bad debt is written off as irrecoverable in the books of account of the assessee. The ratio laid down by the Hon'ble Supreme Court in TRF Ltd. Vs. CIT (supra) makes it clear that once the assessee writes off the debt in its books of account, then the condition under Section 36(1)(vii) stands satisfied, subject to Section 36(2) of the Act and the Revenue cannot insist upon further proof of irrecoverability. For the sake of clarity, we deem it apposite to cull out the observations of the Hon'ble Apex Court in TRF Ltd. Vs. CIT (Supra), as under: "In these appeals, we are concerned with Assessment Year 1990-1991 and Assessment Year 1993-1994. Prior to 1st April, 1989, every assessee had to establish, as a matter of fact, that the debt advanced by the assessee had, in fact, become irrecoverable. That position got altered by deletion of the word "established", which earlier exis....
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....s. Apart from that, the observation of the Ld. Pr. CIT that the AO had erred in not examining the fact that whether the subject bad debts were admitted as income in the debtor's books of account, the same, in our view, is not relevant for considering the allowability of the claim of deduction of bad debt raised by the assessee company. As observed by us hereinabove, after the amendment to Section 36(1)(vii) of the Act with effect from 01.04.1989, it is sufficient if the bad debt is written off as irrecoverable in the accounts of the assessee, and the requirement of establishing that the debt has become irrecoverable is no longer necessary. Accordingly, as there is no pre-condition contemplated under law that the claim of an assessee for bad debt is to be allowed subject to the condition that the said amount has been offered as income in the debtor's books of account, we are unable to concur with the aforesaid observation of the Ld. Pr. CIT. Therefore, in view of our aforesaid observations, we find no infirmity in the view taken by the AO who after necessary verifications had allowed the claim of the assessee company for deduction of bad debts. Consequently, the assessment order all....
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....ught to have considered the same instead of setting aside the matter to the file of the AO. If tax has been duly discharged under Section 115QA, no further demand can be raised in the hands of the company. The Revenue has not disputed the genuineness of the challans nor brought any material to show short payment. The Ld. CIT-DR fairly submitted that as the assessee company had under section 115QA of the Act paid tax on the buy-back of 6615000 shares for a total consideration of Rs. 20,48,00,000/-, and had furnished the complete details alongwith copies of challans, therefore, to the said extent the contention of the Ld. AR is not being objected. We, thus, in the backdrop of the aforesaid facts, set aside the order passed u/s 263 of the Act on the aforesaid issue by the Pr. CIT. (D). Ind AS 116 adjustments - amortization and lease payments 20. Apropos the Ld. Pr. CIT observation that the assessee company had failed to produce the ICDS workings of "Amortization Charge as per Ind AS 116" of Rs. 4,20,41,563/-, and had directed the AO to examine the allowability of "Amortization Charge as per Ind AS 116" claimed at Rs. 4,20,41,563/- vis-a-vis workings as per ICDS and decide accord....